Gevo Inc. expects to close early this year on a deal to acquire the ethanol production and carbon capture and storage assets of Red Trail Energy LLC in Richardton, North Dakota, for $210 million. Gevo intends to transform the RTE facility into an operation that produces transportation fuels and chemicals with net-zero emissions.&nbsp;In Illinois, Crysalis Biosciences Inc. announced plans in October 2024 to retrofit a shuttered ethanol plant into a first-of-its-kind SAF plant. Crysalis intends to produce 5,000 to 10,000 gallons per day of low carbon-intensity sustainable aviation fuel (SAF), or the feedstock needed for its production.Although the conversion, utilization and long-term plans of Gevo and Crysalis differ in many ways, there are common themes between the projects—they illustrate the growing trend in producers, investors and even state organizations entering the SAF market. These parties want to play a part in carbon intensity score reduction and job creation and to establish their place in a new, financially appealing opportunity that links ethanol production to SAF production.Years-Long Search&nbsp; Patrick Gruber, CEO of Gevo Inc., believes RTE will help the company reach its near- and long-term goals. “We have been looking for years for an existing ethanol plant,” he says.&nbsp;Gruber and Chris Ryan, president and chief operating officer, share five main reasons for the purchase and conversion of RTE to a SAF facility.• The revenue gained from RTE operations will combine with Gevo’s operations to make the company’s adjusted EBITDA positive in 2025.&nbsp;• Gevo will have the ability to market carbon abatement while also delivering advanced biofuel, enhancing Gevo’s value to shareholders.• The value of Gevo’s RTE operations in conjunction with its goals for creating what it calls Net-Zero carbon sites capable of producing SAF are well-suited to serve U.S. and Canadian markets.&nbsp;• The Net-Zero 1 SAF project that Gevo is developing near Lake Preston, South Dakota, will also benefit from the CCS capabilities of the Richardton site, as well as the additional supply of low carbon-intensity ethanol that could be used on site or elsewhere.&nbsp;• And finally, the CCS assets of RTE present a major opportunity for future CCS work. Of the 1 million metric tons available for capture and sequestration per year at the site in North Dakota, only 160,000 metric tons are currently being utilized.&nbsp;“When we first visited Red Trail, we could see that their vision for reducing carbon was very much in line with ours,” says Ryan. For the ethanol industry, he adds, “it is ahead of the game.”&nbsp;The CCS asset pursued and created by RTE was a multi-year, multi-million-dollar effort that involved many organizations, permits and exploratory growing pains. Since 2022, the capture and sequestration operation has been running without incident and today is generating 45Q tax credits.&nbsp;“Even though the Red Trail board was open to selling the asset, they wanted someone that could take the next step,” Ryan says.&nbsp;Gruber is eager to point out that his team is committed to taking the next steps at RTE and beyond. While committed to producing SAF, Gevo is also admittedly on a mission to change the narrative about renewable energy such as SAF and other biobased products. Gruber wants the industry to focus on a net-zero outcome—he believes it should be the ultimate goal, from the agriculture practices used to grow corn, to the end products such as ethanol for fuel or SAF feedstock. SAF presents an exciting future for Gevo and ethanol producers alike, he says, but no one cares about SAF with a high CI score. “That is the message the ethanol industry needs to remember,” Gruber says.&nbsp;Gruber enthusiastically explains the math behind the net-zero scenario at RTE. “We are pushing the envelope,” he says. “Red Trail is where it will work.”&nbsp;Ryan says Gevo will be able to go fast and accomplish a lot at the RTE facility, in part because of the work Gevo has already done in South Dakota. The company will use plans initially geared for its proposed Lake Preston biorefinery to update the RTE operation. Gevo creates modularized systems that are pre-tested at fabrication yards before they are shipped, Ryan says. The tech in the modularized units relies on corn-based ethanol as a feedstock to produce SAF and other products.&nbsp;The main hurdle for Gevo will be in permitting, but overall, Ryan and his team have several improvements planned for RTE. The company will retain the current employee base. One of the immediate goals is to add a combined heat and power system to lower the CI score even further.&nbsp;Jodi Johnson, RTE CEO, says the team is excited for its future under Gevo’s leadership. “Gevo’s vision for a sustainable future aligns with our philosophy of ‘our farms, our fuel, our future,’” she says.&nbsp;Meanwhile, Gevo has secured a conditional commitment from the U.S. DOE Loan Programs Office for a loan guarantee of roughly $1.46 billion, to be used for the Net-Zero 1 facility in South Dakota. The plant could represent the largest-ever economic development project in the state’s history, according to Lindsay Fitzgerald, senior vice president of public affairs for Gevo.&nbsp;The loan guarantee could also be important for the growth of the SAF industry overall, Gruber says.&nbsp;“This valuable commitment to help finance NZ1, if finalized, should also attract other capital investments to unlock SAF commercialization, given the robust due diligence conducted by the agency,” Gruber says. “The due diligence work by the DOE has been incredibly detailed and thorough, and the benefit is a substantially reduced execution risk profile for the project.”&nbsp;Gruber says he knows everyone is watching Gevo and that the RTE deal will draw even more attention. He and Ryan are enthusiastic about the future and undeterred by forging a path no one else has taken before, he says, especially with their goal of investing in and bringing to life the concept of carbon abatement reaching net zero.From Shuttered To SAF&nbsp; Crysalis Biosciences is a biochemicals maker that, like Gevo, has invested in an ethanol plant to fulfill its true SAF vision. In early 2024, the company acquired and began renovation of a 55 MMgy ethanol plant shuttered in 2019 near Sauget, Illinois, a mostly industrial area adjacent to the Mississippi River in greater St. Louis. The original plant, run by Center Ethanol, included four fermentation tanks, four distillation tanks, a beer well and other field-erected tanks across a 57-acre campus.Crysalis, with help from the National Renewable Energy Lab, developed its biorefinery tech that converts plant-derived raw materials into various chemicals through microbial fermentation with catalytic upgrading. The company has used a variety of funding and backing to make the initial purchase and subsequent upgrades to the plant, including investments from the Sustainable Aviation Fuel Financing Alliance Fund (SAFFA Fund I) that counts Airbus as its anchor investor.The ethanol plant conversion will create new jobs and maintain existing positions, according to the company. Crysalis is in the process of hiring a new maintenance manager, process operator and plant trainer, along with plant engineers, lab technicians, logistics personnel, general office help and maintenance mechanics. Existing positions such as plant manager, EHS manager, operations manager, office manager, maintenance techs and process operators will all need to be retained.&nbsp;Recently, Crysalis was awarded $239.5 million in funding from the Illinois Department of Commerce and Economic Opportunity office through a Reimagining Energy and Vehicles in Illinois (REV Illinois) agreement.&nbsp;“It’s an exciting project that will support the decarbonization of the St. Louis airport and create more good-paying jobs in the Metro East,” says Eliza Glezer, assistant deputy director of communications for DCEO.&nbsp;According to Glezer, Illinois is competing with other states and countries for companies like Crysalis and winning for several reasons. Site Selection Magazine ranked Illinois as the No. 2 state for corporate expansions or relocations as of 2023. The state has embraced a “Team Illinois” approach to helping businesses like Crysalis navigate the exploration or application process for funding, including the funding it received from REV.“There is no cap on the number of companies that can benefit from the REV program,” Glezer says. “While the REV program does have stipulations for meeting investment and hiring goals, as well as annual reporting requirements, the barriers to entry are low.”&nbsp;An eligible company looking to establish or expand its operations in Illinois could qualify with a capital investment starting at $2.5 million and creation of at least 50 new jobs (or 10% of their statewide employment, whichever is less) within four years. REV benefits include payroll withholding, credits and exemptions.&nbsp;To be eligible, companies must either be manufacturing products in the supply chain for electric vehicles (including batteries and other EV components) or for renewables. The second criterion is that the company must meet minimum job creation and capital investment thresholds. Team Illinois is available to explain the full benefits and requirements to any company, as well as to assist in site selection and market analysis, Glezer says.&nbsp;Illinois is also creating benefits for SAF users. In 2023, the state passed a SAF purchase credit. Through 2032, SAF sold to or used by an aircraft in Illinois would earn a credit of $1.50 per whole gallon purchased.&nbsp;REV provides funding opportunities to EV, solar, renewable and energy storage manufacturers that move or expand, to Illinois. Crysalis is the first-ever SAF producer to earn the funding.&nbsp;REV was initially part of the Reimagining Electric Vehicles Act passed by the Illinois General Assembly in 2021, according to Glezer. REV was then updated and renamed in 2022 to include SAF and other renewable energy projects because of their potential impacts to the regions where they are produced or consumed.&nbsp;It’s how Glezer explains the renewed goal of REV that helps reveal why projects and deals by companies like Gevo or Crysalis are meaningful now, and why more might be on the way in the future. &nbsp;The goal of REV is to create incentives that support well-paying jobs, she says, “in these newer, fiercely competitive industries, while localizing the supply chain for products that reduce carbon emissions.” Author: Luke Geiver&nbsp; writer@bbiinternational.com

2024-11-27 - The Case for Conversion (Ethanol Producer Magazine)

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Alcohol-to-jet hopefuls are buying up both healthy and shuttered ethanol plants, drawing up their business blueprints while state and federal funding mechanisms expand to allow for the SAF sector's rise. 

The Case for Conversion

The Case for Conversion

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